Citation NR: 9612544
Decision Date: 05/07/96 Archive Date: 05/16/96
DOCKET NO. 94-05 170 ) DATE
)
)
On appeal from the
Department of Veterans Affairs Regional Office in Houston,
Texas
THE ISSUE
Propriety of offset of the veteran's VA disability
compensation to recoup the gross amount of his Special
Separation Benefit (SSB) under 10 U.S.C. § 1174a.
ATTORNEY FOR THE BOARD
James R. Siegel, Counsel
INTRODUCTION
The veteran served on active duty from September 1977 to
August 1980 and from May 1982 to August 1992. The Regional
Office (RO) notified the veteran by letter in June 1993 that
his Department of Veterans Affairs (VA) disability
compensation award would be withheld until the full amount of
his SSB has been recovered.
CONTENTIONS OF APPELLANT ON APPEAL
The veteran contends that he was never advised that the SSB
payment would be subject to recoupment. He points out that
the agreement he signed did not mention that any VA
compensation award would be affected by the SSB he received.
He argues that, although taxes were deducted from the total
SSB, the VA is recouping the entire amount of the payment.
He claims that, if any amount is to be recouped, it should
only be the amount he actually received.
DECISION OF THE BOARD
The Board, in accordance with the provisions of 38 U.S.C.A.
§ 7104 (West 1991 & Supp. 1995), has reviewed and considered
all of the evidence and material of record in the veteran's
claims file. Based on its review of the relevant evidence in
this matter, and for the following reasons and bases, it is
the decision of the Board that the veteran's VA disability
compensation is subject to recoupment of the gross amount of
the SSB payment he received.
FINDINGS OF FACT
1. The veteran received SSB in the amount of $76,638.69 at
the time of his separation from service in 1992.
2. By rating decision of April 1993, service connection was
granted for several disabilities, evaluated as 20 percent
disabling in combination.
3. Payment of the VA disability compensation has been
withheld, pending recoupment of his SSB.
CONCLUSION OF LAW
Recoupment of the veteran’s SSB through withholding of VA
disability compensation is appropriate. 10 U.S.C.A. §§ 1174,
1174a; 38 U.S.C.A. § 5304 (West 1991); 38 C.F.R. 3.700(a)(5)
(1995).
REASONS AND BASES FOR FINDINGS AND CONCLUSION
The record demonstrates that the veteran was paid the sum of
$76,638.69 as a SSB payment when he agreed to be voluntarily
separated from active service in 1992. He submitted a claim
of service connection for various disabilities shortly after
his discharge from active duty. By rating action in April
1993, service connection was granted, and his service-
connected disabilities were rated a combined 20 percent
disabling.
The RO initially advised the veteran in May 1993 that since
he had received “disability severance pay”, his VA disability
compensation benefits would be withheld until the amount he
received ($76,638.69) had been recovered. Later that month,
the veteran informed the VA that he had received a SSB
payment, not severance pay. By letter in June 1993, the RO
acknowledged that the veteran had received a SSB payment, but
his disability compensation payments continued to be withheld
since the SSB was also subject to recoupment.
A veteran who has received separation pay may receive
disability compensation for disability incurred in or
aggravated by service prior to the date of receipt of the
separation pay subject to recoupment of the total amount
received as separation pay. 38 U.S.C.A. § 5304; 38 C.F.R.
§ 3.700(a)(5).
The question of whether SSB payments may be recouped was
addressed in a recent opinion of the VA General Counsel. In
VA O.G.C. Prec.Op. No. 14-92 (June 22, 1992), it was noted
that the Defense Authorization Act, Pub. L. No. 102-190,
added section 1174a (creating a lump-sum benefit designated
as SSB) and section 1175 (creating an annuity benefit
designated as a voluntary separation incentive) to Title 10,
United States Code. The purpose of the sections was to
encourage service members who would otherwise face possible
involuntary separation or denial of reenlistment to
voluntarily separate from active service while offering a
choice between the two programs. It was indicated that the
plain language of these sections, the implementing
regulations and a Department of Defense policy statement
supported the interpretation that the amount of the
separation benefit would be recouped from VA disability
compensation. Accordingly, it was concluded that VA
disability compensation should be offset to recoup the amount
of the SSB received by a former member of the armed forces.
This precedent opinion of the VA General Counsel is binding
on the Board. See 38 U.S.C.A. § 7104(c); 38 C.F.R.
§ 20.101(a) (1995).
The veteran argues that the gross amount of the SSB should
not be recouped since VA payments are tax exempt and the SSB
was subject to income tax. In this regard, under 10 U.S.C.
§ 1174(h)(2), a member who has received separation pay under
this section, or severance pay or readjustment pay under any
other provision of law, based on service in the armed forces
shall not be deprived, by reason of his receipt of such
separation pay, severance pay, or readjustment pay, of any
disability compensation to which he is entitled under the
laws administered by the VA, but there shall be deducted from
that disability compensation an amount equal to the total
(emphasis added) amount of separation, severance pay, and
readjustment pay received. This provision was made
applicable to SSB. 10 U.S.C. § 1174a(g). Although at one
time lump sum readjustment pay under former 10 U.S.C. § 687
provided for a fractional recoupment, this provision was
repealed. There is no statutory basis for an offset of any
taxes paid for SSB. See VA O.G.C. Prec.Op. No. 67-91 (Aug.
30, 1991). That opinion held that “[a] veteran who receives
military disability severance pay under 10 U.S.C.§ 1212(c)
cannot receive VA disability compensation until VA has
recouped an amount equal to the ‘gross amount’ of the
disability severance pay,” and contains a discussion of
pertinent legislative history regarding readjustment pay
recoupment and an explanation as to why the gross amount of
SSB must be recouped by the VA:
[F]ractional recovery by VA from monthly
disability compensation payments of an
amount equal to 75 percent of the lump-
sum readjustment payments received under
former 10 U.S.C. § 687 was [previously]
authorized, “in order to take into
account the tax paid on the original
payment and to avoid recoupment of an
amount in excess of the net received as
readjustment pay.” [citations
omitted]...The express statutory
authority in former 10 U.S.C. § 687 to
recoup an amount of VA disability
compensation equal to 75 percent of the
lump-sum readjustment pay is implemented
in 38 C.F.R. § 3.700(a)(2). [However, in
a footnote below, it was noted that] 10
U.S.C. § 687 was repealed in 1980 by Pub.
L. No. 96-513 § 109(a), 94 Stat. 2870 and
was replaced by 10 U.S.C. § 1174 which
does not provide statutory authority for
VA to recoup an amount of VA disability
compensation equal to a fractional amount
of lump-sum readjustment payment.
Accordingly, it follows that the veteran's VA disability
compensation is properly being withheld to recoup the full
amount of the SSB payment he received under authority of 10
U.S.C. § 1174a, since there is no statutory basis to do
otherwise. As to the tax consequences, the foregoing may
very well be perceived as a harsh outcome. Nevertheless, tax
issues indeed are beyond the purview of the VA, and involve
questions for resolution by the Internal Revenue Service and,
perhaps ultimately by the courts.” See VA O.G.C. Prec.Op.
No. 67-91.
In Sabonis v. Brown, 6 Vet.App. 426, 430 (1994), the United
States Court of Veterans Appeals held that in a case where
the law is dispositive of the claim, it should be denied
because of lack of legal entitlement under the law.
(CONTINUED ON NEXT PAGE)
ORDER
Since the veteran's VA disability compensation is subject to
recoupment of the gross amount of the SSB, the appeal is
denied.
J. F. GOUGH
Member, Board of Veterans' Appeals
The Board of Veterans' Appeals Administrative Procedures
Improvement Act, Pub. L. No. 103-271, § 6, 108 Stat. 740, 741
(1994), permits a proceeding instituted before the Board to
be assigned to an individual member of the Board for a
determination. This proceeding has been assigned to an
individual member of the Board.
NOTICE OF APPELLATE RIGHTS: Under 38 U.S.C.A. § 7266 (West
1991 & Supp. 1995), a decision of the Board of Veterans'
Appeals granting less than the complete benefit, or benefits,
sought on appeal is appealable to the United States Court of
Veterans Appeals within 120 days from the date of mailing of
notice of the decision, provided that a Notice of
Disagreement concerning an issue which was before the Board
was filed with the agency of original jurisdiction on or
after November 18, 1988. Veterans' Judicial Review Act,
Pub. L. No. 100-687, § 402, 102 Stat. 4105, 4122 (1988). The
date which appears on the face of this decision constitutes
the date of mailing and the copy of this decision which you
have received is your notice of the action taken on your
appeal by the Board of Veterans' Appeals.
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